The aim of this paper is to better understand the impacts of a decentralized public health delivery system of the Philippines on local government spending. Specifically, it investigates determinants of local government public health expenditures for the year 2007. Within the context of the Philippines' decentralized health system, particular emphasis is given to horizontal fiscal interactions. The research addresses these issues in an empirical spatial econometric framework utilizing public finance local government data. A key finding is the positive fiscal interaction among local governments that is consistent with competition for scarce resources such as doctors, as well as competition among political actors prior to elections. The policy implications of these results are also discussed.